China’s stock market crash will likely not greatly affect North American markets, despite all the media coverage. In fact, the impact on China’s own economy should be minimal. Most Chinese households are not directly involved in its small stock market, which is still up from a year ago. Similarly, the risk of international financial contagion from the Greek Debt Crisis is low.
The U.S. economy is now on its strongest sustainable growth trajectory since the recovery began 6 years ago. Job gains are boosting confidence and income growth, leading to increased spending and more job gains. The federal deficit is running 16% lower than last year and household debt service burdens are the lowest since 1980.
Persistent low global oil prices are adding to positive consumer momentum in the U.S., where oil output and inventories continue to increase. Further, the Iranian nuclear deal will introduce a large amount of crude oil into the already over-supplied market. Low gasoline prices are here to stay.
Consequently, Canada’s oil-producing provinces are facing a prolonged economic slowdown. Capital spending plans are shrinking and credit conditions are expected to tighten.
The overall Canadian economy seems to have stalled and may contract again in Q2 – a technical recession. Hiring intentions remain weak, and the CAD is declining. This has not improved the performance in Canada’s non-energy exports, though. In fact, Canada recently recorded an unprecedented trade deficit with the United States, despite a surprisingly strong U.S. demand for Alberta bitumen.
Even with the slowdown, employment in the GTA has surged. Capital spending plans are holding up well and home sales are strong, with Toronto and Vancouver continuing to be the hottest markets in Canada.
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